Big Bank Earnings Spotlight Unstoppable Digital Shift

Big banks’ earnings have shown the great financial services digital shift continues.

J.P. Morgan, Bank of America, Citi and Wells last week provided variations on several themes: A mild recession seems a real possibility this year. The specter of credit losses requires prudence and a boost in loan loss provisions, despite some resilience in consumer spending.

And the rosters of clients doing their banking online continues to grow. Those same clients are actively, digitally engaged, turning to electronic checks, P2P payments and online financial assistants.

Branch counts have also dipped, or at best remained roughly flat, helping underpin the fact that the fundamental change of doing more, online and across devices means less urgency to build out costly brick and mortar footprints.

A few stats stand out.

Bank of America said in its earnings presentation and commentary that digital “sales” made through the company’s online channels were up 22% year over year and now account for 49% of that activity. Active mobile banking users was up more than 7% year on year, to 35.5 million individuals.

“Verified digital users grew to 56 million with 73% of our consumer households fully digitally active,” CEO Brian Moynihan noted on the call. “We have had more than one billion logins to our digital platforms each month, and that’s been going on for some time.”

He also added that there were 146 million interactions with Erica, Bank of America’s virtual financial assistant, in the most recent quarter, up from about 123 million a year ago, or 18.7%. Erica users were 33.5 million in the fourth quarter, versus 24.6 million last year.

One snapshot of consumer-level activity can be seen as the 178 million “sent” Zelle transactions outpaced the 115 million checks sent in the quarter by a wide margin.

Management also noted on the call that the digital shift has benefited the bank’s operating structure as well – Bank of America serviced those customers with 387 fewer financial centers or branches than had been seen since before the pandemic. The bank’s financial center count stood at a bit more than 3,900 at the end of last year, down from more than 4,170 a year ago.

J.P. Morgan’s active mobile customers gained 9% to 49.7 million consumers.  Branch counts slipped by roughly three from a year ago to a recent 4,787.

Rationalizing Brick and Mortar Ops

“We continue to focus on branch rationalization as digital adoption and usage among our customers have steadily increased,” Mike Santomassimo, Wells Fargo’s CFO, said during last week’s conference call.

The company’s bank branch count was 3.7% lower than a year ago, at 4,598. Wells reported that it had 28.3 million mobile active customers, up 4% year on year, and mobile logins stood at 6.6 billion.

Management noted the appeal of the recently announced Vantage, the digital banking platform that uses AI and machine learning to provide what is billed as a “tailored” set of recommendations and insights to clients. Santomassimo said the bank will continue to move more applications to the cloud and consolidate data centers this year.

Citi’s active digital users were up 6% to 25 million; its active mobile users outpaced that growth at 10% to 18 million as branch counts dipped by a percent. The filings showed that digital deposits (end of period) were up 21% to $24 billion. CEO Jane Fraser noted on the call that 80% of the bank’s customers have been engaging digitally. Tech spending at the bank was up 13% year on year, according to management.

The unstoppable digital shift will cement banks’ place in the connected economy, well beyond transactions and building up accounts. As PYMNTS’ research showed late last year, more than half of consumers trust the banks to provide super apps — digital front doors that serve as the gateway to a host of financial and non-financial channels.  The more they use mobile and digital banking offerings, the more that trust will build.